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Multiple Choice Quiz
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1
The method that does not necessarily produce a declining pattern of depreciation over an asset's service life is:
A)The double-declining-balance method.
B)The sum-of-the-years'-digits method.
C)The units-of-production method.
D)All of these answer choices produce a declining pattern.
2
A delivery van that cost $40,000 has an expected service life of eight years and a residual value of $4,000. Depreciation for the second year of the asset's life using the sum-of-the-years'-digits method is:
A)$4,500
B)$7,000
C)$8,000
D)All of these answer choices are incorrect.
3
In question 2, depreciation for the second year of the asset's life using the DDB method is:
A)$7,500
B)$6,750
C)$4,500
D)All of these answer choices are incorrect.
4
On January 1, 2016, the Holloran Corporation purchased a machine at a cost of $55,000. The machine was expected to have a service life of 10 years and a $5,000 residual value. The straight-line depreciation method was used. In 2018 the estimate of residual value was revised from $5,000 to zero. Depreciation for 2018 should be:
A)$4,500
B)$5,500
C)$5,625
D)$5,000
5
In question 4, assume that instead of revising residual value, in 2018 the company switched to the SYD depreciation method. Depreciation for 2018 should be:
A)$5,500
B)$5,625
C)$8,889
D)$10,000
6
Felix Mining acquired a copper mine at a total cost of $3,000,000. The mine is expected to produce 6,000,000 tons of copper over its five-year useful life. During the first year of operations, 750,000 tons of copper was extracted. Depletion for the first year should be:
A)$600,000
B)$375,000
C)$1,500,000
D)All of these answer choices are incorrect.
7
In 2017, the controller of the Green Company discovered that 2016 depreciation expense was overstated by $50,000, a material amount. Assuming an income tax rate of 40%, the prior period adjustment to 2017 beginnings retained would be:
A)$0
B)$30,000 debit.
C)$30,000 credit.
D)All of these answer choices are incorrect.
8
A machine is purchased on September 30, 2016, for $60,000. Useful life is estimated at four years and no residual value is anticipated. The SYD depreciation method is used. The acquiring company's fiscal year ends on December 31. Depreciation for 2017 should be:
A)$26,250
B)$24,000
C)$18,000
D)$22,500
9
In question 8, assume that the company instead used the DDB depreciation method. Depreciation for 2017 should be:
A)$15,000
B)$30,000
C)$26,250
D)All of these answer choices are incorrect.
10
Which of the following approaches cannot be used to determine the fair value of an impaired asset?
A)Prices of similar assets.
B)The market price of the asset.
C)The sum of the discounted expected cash flows.
D)The sum of the undiscounted expected cash flows.
11
Which of the following types of subsequent expenditures is not normally capitalized?
A)Additions.
B)Improvements.
C)Repairs and maintenance.
D)Rearrangements.
12
In January of 2016, the Phillips Company purchased a patent at a cost of $100,000. In addition, $10,000 in legal fees were paid to acquire the patent. The company estimated a 10-year useful life for the patent and uses the straight-line amortization method for intangible assets. In 2018, Phillips spent $25,000 in legal fees for an unsuccessful defense of the patent. The amount charged to income (expense and loss) in 2018 related to the patent should be:
A)$103,000
B)$36,000
C)$113,000
D)All of these answer choices are incorrect.
13
The Cromwell Company sold equipment for $35,000. The equipment, which originally cost $100,000 and had an estimated useful life of 10 years and no residual value, was depreciated for five years using the straight-line method. Cromwell should report the following in its income statement in the year of sale:
A)A $15,000 loss.
B)A $15,000 gain.
C)A $35,000 gain.
D)All of these answer choices are incorrect.
14
Jasper Inc. prepares its financial statements according to International Financial Reporting Standards. At the end of its 2016 fiscal year, the company chooses to revalue its equipment. The equipment cost $810,000, had accumulated depreciation of $360,000 at the end of the year after recording annual depreciation, and had a fair value of $495,000. After the revaluation, the equipment account will have a balance of:
A)$810,000
B)$891,000
C)$495,000
D)All of these answer choices are incorrect.
15
Declarmen Corporation owns factory in the United Kingdom. A change in business climate indicates that Declarmen should investigate for possible impairment. Below are date related to the factory's assets ($ in millions):

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The amount of impairment loss that Declarmen should recognize according to U.S. GAAP is:
A)None.
B)$30 million.
C)$60 million.
D)$45 million.
16
In question 15, the amount of impairment loss that Declarmen should recognize according to International Financial Reporting Standards is:
A)None.
B)$30 million.
C)$60 million.
D)$45 million.
17
In 2014, Cordova Inc. acquired Cordant Corporation and $140 million in goodwill was recorded. At the end of its 2016 fiscal year, management has provided the following information for a required goodwill impairment test ($ in millions):

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Assuming that Cordant is considered a reporting unit, the amount of goodwill impairment loss that Cordova should recognize according to U.S. GAAP is:
A)None.
B)$40 million.
C)$50 million.
D)$60 million.
18
Assuming that Cordant is considered a cash-generating unit, the amount of goodwill impairment loss that Cordova should recognize according to International Financial Reporting Standards is:
A)None.
B)$40 million.
C)$50 million.
D)$60 million.
19

This question is based on Appendix11A

MACRS depreciation is equivalent to:
A)The straight-line method with a switch to SYD.
B)The DDB method with a switch to straight line.
C)The straight-line method.
D)The DDB method.





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